Lantronix(US:LTRX)2023-02-10 02:38Financial Data and Key Metrics Changes - For Q2 fiscal 2023, revenue was $31.5 million, down from $33.7 million in Q2 fiscal 2022, and a sequential decline of 1% [18] - GAAP net loss was $2.6 million or $0.07 per share, compared to a net loss of $2.4 million or $0.08 per share in Q2 fiscal 2022 [19] - Non-GAAP net income was $1.4 million or $0.04 per share, down from $3.3 million or $0.10 per share in the same quarter last year [19] - Gross margin for Q2 fiscal 2023 was 44%, consistent with the prior quarter and a 900 basis point improvement year-over-year [18] Business Line Data and Key Metrics Changes - Embedded IoT Solutions revenue totaled $13.7 million, down 9% sequentially and 12% year-over-year, representing 43% of total revenues [6] - Software and services revenue was approximately $2.9 million, up 41% sequentially and 71% year-over-year, with ARR from software and services totaling just over $5.2 million [7] - Systems Solutions revenue was $14.9 million, approximately 47% of total revenues, up 2% sequentially but down 9% year-over-year [22] Market Data and Key Metrics Changes - The company noted that demand for embedded Ethernet and WiFi solutions was healthy, but supply disruptions continued to limit the ability to meet customer demand [6] - Shipments to electric vehicle customers continued as planned, with the factory in Turkey reportedly unaffected by recent earthquakes [6] Company Strategy and Development Direction - The company finalized its largest contract in history, a $40 million smart grid compute platform, which is expected to ramp up significantly in fiscal 2024 [5][21] - The company aims for $250 million in annual revenue in the intermediate term, supported by a strong opportunity pipeline exceeding $200 million [21] - The management is focusing on transforming the sales strategy to target larger deals and longer sales cycles, moving from a channel-centric model to a more direct engagement approach [37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a backlog near record highs and a slowly improving supply chain as factors that will support growth [23] - The company anticipates a resumption of growth for the remainder of the fiscal year, driven by solid bookings and a strong opportunity funnel [23] - Management highlighted that while there are still challenges in the supply chain, improvements are being seen, particularly in channel inventory levels [28] Other Important Information - The company expects to receive aggregate prepayments of $20 million during the next six months, which will positively impact the balance sheet [4][20] - The company is experiencing some challenges with specific components affecting WiFi shipments, but overall supply chain conditions are improving [28] Q&A Session Summary Question: Can you provide more details on the Gridspertise contract ramp-up? - Management indicated that the contract is expected to ramp up strongly in Q1 fiscal 2024 and continue into the December quarter, with additional SKUs being discussed for follow-on engagement [25] Question: What is the current state of the supply chain? - Management noted that while there are still problematic components, the supply chain is improving overall, with a reduction in channel inventory observed [28] Question: How will the Gridspertise contract impact gross margins? - Management expects no margin dilution from the Gridspertise contract and anticipates improvements in gross margins as recurring revenue grows [36] Question: What is the outlook for core business growth over the next few years? - Management indicated that the core business should see mid to high-single digit growth, with some older product lines declining while funds are redirected to higher growth opportunities [58]